staff paper june 2019 ifrs interpretations committee ... · 2 for the purposes of generating future...

The IFRS Interpretations Committee is the interpretative body of the International Accounting Standards Board (Board). The Board is the independent

standard-setting body of the IFRS Foundation, a not-for-profit corporation promoting the adoption of IFRS Standards. For more information, visit

www.ifrs.org..

of 1

Agenda ref 12A

STAFF PAPER June 2019

IFRS® Interpretations Committee meeting

Project Holdings of Cryptocurrencies

Paper topic Comment letters

CONTACT Craig Smith [email protected] +44 (0)20 7246 6410

This paper has been prepared for discussion at a public meeting of the IFRS Interpretations Committee (Committee) and does not represent the views of the International Accounting Standards Board (Board), the Committee or any individual member of the Board or the Committee. Comments on the application of IFRS Standards do not purport to set out acceptable or unacceptable application of IFRS Standards. Decisions by the Board are made in public and reported in IASB® Update. Decisions by the Committee are made in public and reported in IFRIC® Update.

Introduction

1. This paper reproduces comment letters received on the tentative agenda decision

published by the IFRS Interpretations Committee in March 2019 on ‘Holdings of

Cryptocurrencies’.

2. Brane Inc includes its internal accounting policy for holdings of cryptocurrencies as

an attachment to its comment letter. Because of its length we have not included that

attachment in this paper. However, it is available on our website.

http://www.ifrs.org/

mailto:[email protected]

https://www.ifrs.org/projects/work-plan/holdings-of-cryptocurrencies/comment-letters-projects/tad-holdings-of-cryptocurrencies/#comment-letters

1

26 April 2019

Ms. Sue Lloyd

Chair of the IFRS Interpretations Committee

International Accounting Standards Board

Columbus Building, 7 Westferry Circus

Canary Wharf, London, E14 4HD

United Kingdom

Comments on the Tentative Agenda Decision Relating to the Holdings of Cryptocurrencies

1. The Accounting Standards Board of Japan (the “ASBJ” or “we”) welcome the

opportunity to comment on the IFRS Interpretation Committee (the “Committee”)’s

tentative agenda decision relating to the holdings of cryptocurrencies, proposed in

the March 2019 IFRIC Update.

2. We agree with the interpretation provided in the tentative agenda decision regarding

the application of existing IFRS Standards. However, we believe that the

application of existing IFRS Standards, as stated, may result in inappropriate

outcomes which do not provide the most relevant information, from the viewpoint of

relevant financial reporting. Accordingly, considering the social impact of

cryptocurrencies and the priority within the IASB’s standard-setting projects, we

believe that IFRS Standards need to be amended in a timely manner.

Measurement of cryptocurrencies

3. When an entity holds cryptocurrencies with an active market, we believe that

measuring such cryptocurrencies at fair value through profit or loss (FVTPL)

generally would provide the most relevant information to users of financial

statements.

4. In many cases, the price risk of cryptocurrencies is significant, and cryptocurrencies

themselves do not have an inherent or underlying value. Therefore, in such cases,

the only way an entity can generate cash flows is to sell them at the market.

2

5. As for the measurement of such cryptocurrencies, the IASB staff stated, in paragraph

50 of Agenda Paper 3 for discussions at the April 2018 Accounting Standards

Advisory Forum (ASAF) meeting, that its informal outreach noted that FVTPL

provides the most useful information. Consistent with this view, we believe that

cryptocurrencies with an active market (such as Bitcoins) generally should be

measured at FVTPL to provide the most relevant information.

Amending IFRS Standards

6. Our understanding is that, under the tentative agenda decision, an entity that does not

hold cryptocurrencies for sale in its ordinary course of business would apply IAS 38

and thus would be required to measure its cryptocurrencies using either the cost

model or the revaluation model. We believe that this may result in inappropriate

outcomes which do not provide the most relevant information, from the viewpoint of

relevant financial reporting.

7. We understand that, since the IASB Board meeting in January 2018, the IASB and

the Committee have discussed various alternatives to account for cryptocurrencies,

including the alternative to develop a new standard regarding investments, the

alternative to amend existing IFRS Standards, and the alternative to consider how to

apply IAS 8, but the IASB eventually concluded that it would be too early to amend

IFRS Standards.

8. However, we believe that IFRS Standards need to be amended in a timely manner to

measure certain cryptocurrencies with an active market at FVTPL, considering the

social impact of cryptocurrencies and the priority of the IASB’s standard-setting

projects.

9. We hope our comments are helpful for the Committee’s and the IASB’s

consideration in the future. If you have any questions, please feel free to contact us.

Yours sincerely,

Atsushi Kogasaka

Chair

Accounting Standards Board of Japan

1

2 May 2019

Submitted electronically via www.ifrs.org

Ms. Sue Lloyd Chair of the IFRS Interpretations Committee Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD United Kingdom

RE: Tentative Agenda Decision – Holdings of Cryptocurrencies

Dear IFRS Interpretations Committee Members:

The Canadian Securities Administrators (CSA) is an organization of Canada’s provincial and territorial securities regulators whose objective is to improve, coordinate and harmonize regulation of the Canadian capital markets. The CSA Chief Accountants Committee is comprised of the Chief Accountants from the provinces of Alberta, British Columbia, Ontario and Quebec. The CSA Chief Accountants Committee appreciates the opportunity to provide our comments on the IFRS Interpretations Committee (IFRS IC) tentative agenda decision (TAD) on Holdings of Cryptocurrencies.

In Canada, we have approximately 41 IFRS reporters with cryptocurrency holdings and/or related activities. As can be seen in Appendix I, our research indicates that there are differing accounting practices applied to such holdings, with 76% of entities accounting for cryptocurrency holdings at fair value through profit and loss. In most cases, these entities are applying paragraph 11 of IAS 8, or they consider themselves to be commodity broker-traders in accordance with IAS 2.

We recognize that cryptocurrencies have the definitional elements of intangible assets as described in IAS 38 in that they are identifiable, non-monetary and without physical substance. However, we are concerned that the TAD does not consider IAS 38 in its entirety when analysing the accounting for holdings of cryptocurrencies, under existing IFRSs. Notwithstanding paragraph 5 of the Basis for Conclusion to IAS 38, we think that IAS 38 was not developed for intangible assets such as cryptocurrencies because cryptocurrencies inherently differ in nature from the types of intangible assets discussed in IAS 38 in significant ways:

• The types of intangible assets described in paragraph 9 of IAS 38 (i.e. new processes or systems, licences, intellectual property, etc.) are typically held for use in supporting an entity’s operations. Cryptocurrencies, on the other hand, are generally obtained by the entity

2

for the purposes of generating future economic benefits from their subsequent sale. This contrasts with the examples of future economic benefits that flow from the use of an intangible asset in combination with other assets and resources listed in paragraph 17 of IAS 38 (i.e. revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity).

• Cryptocurrencies tend to be volatile – they are short-term assets that are often held for speculative purposes, and that can be used for exchange for goods or services. These characteristics are unique to cryptocurrencies and were not contemplated when developing IAS 38.

As such, we think IAS 38 produces information that may not be the most useful. Under IAS 38, cryptocurrencies are carried at either cost or a revalued amount. The cost model results in a historical measurement and does not provide current information. IAS 38 permits a revaluation approach when an active market exists, with revaluation changes (other than impairments) not being reflected in profit or loss. Consequently, even if it can be demonstrated an active market exists, profit and loss does not reflect the performance of the cryptocurrency asset.

We note that several IFRS IC members and IASB Board members have expressed significant concern in public meetings about whether IAS 38 provides the most useful information, if applied to holdings of cryptocurrencies. We share these concerns. If the IFRS IC ultimately believes that IAS 38 is not an appropriate standard, then in our view, the IFRS IC should not issue the TAD. Rather, the IASB should re-consider what is an appropriate course of action, such as a narrow scope amendment to IAS 38 by removing cryptocurrencies from its scope, while continuing to monitor the prevalence of cryptocurrency holdings by IFRS reporters in order to determine if more targeted standard setting is required.

If you have any questions about this letter, please do not hesitate to contact us.

Yours truly,

The CSA Chief Accountants Committee

Carla-Marie Hait Chief Accountant British Columbia Securities Commission (604) 899-6726 [email protected]

Lara Gaede Chief Accountant Alberta Securities Commission (403) 297-4223 [email protected]

Cameron McInnis Chief Accountant Ontario Securities Commission (416) 593-3675 [email protected]

Nicole Parent Acting Chief Accountant Autorité des marchés financiers (514) 395-0337 ext. 4455 [email protected]

3

Appendix I – Canadian Cryptocurrency Landscape

Standard Applied Number of Entities Percentage

IAS 8.11 (to arrive at FVTPL) 16 39 %

IAS 2.3(b)* 11 27 %

IFRS 9 – FVTPL 4 10 %

IAS 38 – Cost Model 1 2 %

IAS 38 – Revaluation Model 4 10 %

Not determinable 5 12 %

Total 41 100%

* We note that over half of the entities in this category are cryptocurrency miners.

PO Box 1411Beenleigh QLD 42078 May 2019

Ms Sue LloydChair IFRS Interpretations CommitteeInternational Accounting Standards BoardColumbus Building, 7 Westferry CircusCanary WharfLondon E14 4HDUnited Kingdom

Online submission: https://www.ifrs.org/projects/work-plan/holdings-of-cryptocurrencies/comment-letters-projects/tad-holdings-of-cryptocurrencies/

Dear Sue

Tentative Agenda Decision — Holdings of Cryptocurrencies

I am pleased to make this submission on the Tentative Agenda Decision (TAD) for Holdingsof Cryptocurrencies.

I have extensive experience in accounting advice, across a wide range of clients, industriesand issues in the for-profit, not-for-profit, private and public sectors.

My clients have included listed companies, unlisted and private companies, charitable andnot-for-profit organisations, federal, state and local government departments and agencies inthe public sector, and government owned corporations (government business enterprises). Ialso have some commercial, standard setting and academic experience.

I have comments in the following areas:1. Tentative Agenda Decision contradicts earlier IFRIC Agenda Decision2. Commodity broker-trader3. Using the IAS 2 fair value exemptions as a precedent4. Active market5. Clarification requested for receivables of non-financial assets6. Diversity for accounting for long-term prepayments7. The nuclear option8. Monitoring

Yours sincerely,

David Hardidgehttps://www.linkedin.com/in/davidhardidge/

1 Tentative Agenda Decision contradicts earlier IFRIC Agenda DecisionThe Tentative Agenda Decision appears to contradict IFRIC’s Agenda Decision for DepositsRelating to Taxes other than Income Tax (Deposits Agenda Decision). Under the DepositsAgenda Decision IFRIC concluded that the deposit was a monetary asset1.

While this conclusion was not stated specifically in the published agenda decision, it iscritical to the IFRIC conclusion that the deposit was excluded from the scope of IAS 38Intangible assets. As IFRIC concluded that the deposit was not within the scope of IAS 38,or any other IFRS standard, there was a need to consider IAS 8 and the two conceptualframeworks. If IFRIC had not concluded that the item was a monetary asset, it would seemthat the asset would have been within the extremely broad scope of IAS 38, and thediscussion under the conceptual frameworks would not have been required.

I find IFRIC’s reasoning contradictory and illogical. Under the Deposits Agenda Decision,such a deposit is classified as a monetary item even though the holder does not control its use,does not control how the item is settled and does not know when it will be settled. Yet underthe Tentative Agenda Decision, a cryptocurrency holding is not classified as a monetary itemeven though the holder can control how the asset is used, can choose whether the asset isconverted into fiat currency or goods and services2, can choose when that conversion occursand has access to global exchanges.

Cryptocurrencies have more characteristics of cash than tax deposits. Consequently, if taxdeposits are classified as monetary assets, so too should cryptocurrency holdings. Theaccounting, as outlined by the Tentative Agenda Decision, is nonsensical.

2 Commodity broker-traderPreparers can get to fair value through profit or loss, though it is a kluge. Preparers will needto argue that they are a broker-trader. Under IAS 2, broker-traders are those who buy or sellcommodities for others or on their own account, and that the cryptocurrencies are principallyacquired with the purpose of selling in the near future and generating a profit fromfluctuations in price or broker-traders’ margin.

1 https://www.ifrs.org/projects/2019/deposits-relating-to-taxes-other-than-income-tax/IFRIC March 2018 meeting, Payments relating to taxes other than income tax - Initialconsideration – Paper 7. Comments by staff during meeting that they thought the item was amonetary item to explain their reasoning stated in paragraph 26 that “this asset is not clearlycaptured within the scope of any IFRS Standard”IFRIC May 2018 meeting, Payments relating to taxes other than income tax - Item forcontinuing consideration – Paper 2 paragraph 10(a)IFRIC September 2018 meeting, Payments relating to taxes other than income tax - Item forcontinuing consideration – Paper 7 paragraphs 5, 8 and 13(b), Paper 7A paragraphs 14 andA14 (Example 4).IFRIC January 2019 meeting, Deposits relating to taxes other than income tax - Agendadecision to finalise, Paper 2 paragraph 17(f)2 Would you like to travel using cryptocurrencies? What about travelling to Australia, and inparticular Queensland using cryptocurrencies? Have a look at TravelbyBit “Global digitaltravel made easy” https://www.travelbybit.com/.TravelbyBit is a recipient of a Queensland Government grant,https://www.chiefentrepreneur.qld.gov.au/stories/travelbybit viewed 4 May 2019

This might be difficult for miners of cryptocurrency to argue, as they get paid in thecryptocurrency they mine, and are not purchasing cryptocurrency. Similarly for businessesaccepting cryptocurrency as a form of payment for goods and services. On the other hand,those businesses acquiring cryptocurrency from their operations and not immediatelyconverting into fiat currency, might argue that they are holding the cryptocurrency forspeculative purposes and generating a profit from the increase in price – because otherwisethey would have sold the cryptocurrency.

At least one large accounting firm has cast doubt on the broker-trade approach3.

3 Using the IAS 2 fair value exemptions as a precedentThere is not a lot of guidance on the meaning of broker-traders. The Basis for Conclusionsfor IAS 2 refers to the 2003 amendments to IAS 2, that introduced the exemptions to permitthe use fair value through profit or loss, were included based on “well-established industrypractices”. That reference makes me wonder how you can have a well-established industrypractice of fair value when it would appear to breach the requirements of historical cost underIAS 2. Though there seemed to be an interpretation that IAS 2 only applied when usinghistorical cost, and not when using fair value.

It appears that there is a well-established industry practice to use fair value through profit orloss for cryptocurrencies. This is shown by:

IASB staff research4 where 18 of 26 entities (69%) used fair value through profit orloss, as well as an unspecified number of the other 8 entities.

Canadian statistics5 that showed 76% of 41 entities accounting for cryptocurrencyholdings at fair value through profit or loss.

Given that IAS 2 was amended for appropriate accounting for those situations, the IASBshould consider amendments for this situation.

Issuing the Tentative Agenda Decision will likely result in warped industry practice, giventhe views of a significant number of Board and Committee members that fair value throughprofit or loss is the most appropriate accounting.

3 For example, Grant Thornton “IFRS Viewpoint - Accounting for cryptocurrencies – thebasics” (May 2018) refers to “narrow circumstances” when referring to the broker-traderapproach. https://www.grantthornton.global/en/insights/viewpoint/accounting-for-cryptocurrencies--the-basics/4 IASB November 2018, Cryptocurrencies Paper topic Potential new research project, paper12D paragraph 59.5 Canadian Securities Administrators (CSA) - Chief Accountants Committee submission toIFRIC on Tentative Agenda Decision — Holdings of Cryptocurrencieshttp://eifrs.ifrs.org/eifrs/comment_letters//528/528_25518_RitikaRohaillaCanadianSecuritiesAdministratorsCSAChiefAccountantsCommittee_0_CSACryptocurrencyHoldingsTADResponseLetter.pdf

4 Active marketI noted discussion during the IFRIC meetings that some members believed any fair valuemeasurement should be restricted to those cryptocurrencies with an active market. I note thatnot all listed equity securities are in an active market, with some illiquid securities do notmeet the definition.

Even for impairment purposes, listed security prices are not always used as the primarysource of information for a valuation. An example is Amcor, which has a listed associateAMVIG Holdings Ltd. In 2018 it stated that when assessing impairment in its associate (thehighest of value in use and fair value less costs to sell) it did not use fair value, and used thehigher value in use (i.e. managements’ estimates). Amcor further stated “The Group’s viewis that AMVIG’s quoted share price does not accurately reflect the fundamental value of thebusiness”.

5 Clarification requested for receivables of non-financial assetsAs noted above, IFRIC decided in its Deposits Agenda Decision that the deposit was amonetary item when the receivable relates to a non-financial asset – being the possiblereduction in a non-financial liability (the statutory obligation to pay a tax other than incometax).

I request that IFRIC clarify that receivables for non-financial assets with a significantfinancing component can be similarly classified as monetary items and not brought into thedefinition of intangible asset, or alternatively a significant financing component explicitlyrecognised and measured.

An example are private-public partnerships (also called service concession arrangements) bygrantors accounting under IFRS. The arrangements often have the transfer of a significantresidual value (the working infrastructure in good order) at the end of the term. Public sectorgrantors in Australia use IFRS-based accounting standards. Until the recent issue of AASB1059 Service Concession Arrangements: Grantors (not yet effective) public sector grantorshad to develop their accounting policy under the Australian equivalent to IAS 1.

New South Wales (a state government) chose to base theirs on the UK Financial ReportingStandard 5 ‘Reporting the Substance of Transactions’, with the addition of ApplicationNote F ‘Private Finance Initiative and similar contracts’. The applicable accounting policy“TPP06-08 Accounting for Privately Financed Projects”6 has been used for over 10 years andrequires that the future receivable of the residual be recognised on an emerging basis takinginto account the financing component.

A similar example relates to the “privatisation” of infrastructure assets in Australia. Whilesome privatisations sold the infrastructure assets outright to the private sector, somearrangements were structured as “99 year” leases. The “99 year” lease arrangementsinvolved the lease of the infrastructure for an upfront payment, and the return of workinginfrastructure in good order at the end of the lease term.

I note that the IASB in its 2013 revised Leases Exposure Draft that it proposed similaraccoutring by lessors for the residual to be received.

6 https://arp.nsw.gov.au/tpp06-08-accounting-privately-financed-projects

In addition to recognising a financing component for this non-monetary receivable, NewSouth Wales accounts for the movement in the fair value of the residual infrastructure assets(discounted) as an asset revaluation.

6 Diversity for accounting for long-term prepaymentsI have encountered diversity in the accounting treatment of long-term prepayments and Irequest that IFRIC clarify the treatment. I have encountered situations of long-termprepayments, say 10 to 20 years, and some for 99 years.

I believe that the appropriate accounting is to recognise the asset as a long-term receivable offuture goods and services including a financing component.

However, I have seen other accounting policies, including those advised by large accountingfirms, that uses IAS 38 with initial recognition at a discounted amount and no subsequentrecognition of the financing component. This results in ridiculous outcomes. I have includedtwo examples below.

For Example A (20 years) instead of a service expense of 1,000 pa indexed being recognised,with an additional finance income, a fixed amortisation amount of 841 is recognised as anexpense per year. How is an expense of 841, being lower than even the initial starting serviceexpense of 1,000, be appropriate accounting?

For Example B (99 years) instead of a service expense of 1,000 pa indexed being recognised,with an additional finance income, a fixed amortisation of 513 is recognised as an expenseper year. An even more ridiculous outcome.

Example A (refer detailed calculations attached)1,000 value of services in Year 1, increased by 2.5% pa for 20 years, anddiscounted at 4%Initial recognition at 16,811

If recognised as receivable of a non-financial asset:Total services expense 25,545Total finance income (8,734)Net expense 16,811

If recognised as an intangible, without a significant financing component, andamortised:

Total amortisation expense 16,811

Example B (refer detailed calculations attached)1,000 value of services in Year 1, increased by 2.5% pa for 99 years, anddiscounted at 4%Initial recognition at 50,814

If recognised as receivable of a non-financial asset:Total services expense 420,607Total finance income (369,793)

Net expense 50,814

If recognised as an intangible, without a significant financing component, andamortised:

Total amortisation expense 50,814

7 The nuclear optionGiven the number of IASB and IFRIC members expressing the view that fair valueaccounting would be the best accounting, I am surprised there was not more discussion on thenuclear option, i.e. the “true and fair” override under IAS 1 paragraph 19.

I suggest that IFRIC include reference to this approach if it finalises the Tentative AgendaDecision as drafted.

However, this might raise some interesting issues in Australia which does not permit the“true and fair” override, even in the “extremely rare circumstances” where compliance withaccounting standards “would be so misleading that it would conflict with” the conceptualframework.

8 MonitoringThe IASB should be clearer for the purposes of its proposals7 to monitor cryptoassets, withcryptocurrencies being a subset of cryptoassets.

Such monitoring may not be useful in identifying relevant industry practice, if the IFRICTentative Agenda Decision is finalised as drafted. This is because of the nonsensicalaccounting (subject to my comments above).

However, the monitoring might be useful in determining how many entities have decided toadopt the broker-trader kluge and have had their auditors agree. The monitoring might alsoidentify situations where companies have adopted the “true and fair” override.

7 IASB Update November 2018, https://www.ifrs.org/news-and-events/updates/iasb-updates/november-2018/ accessed 4 Mary 2019

IFRIC Cryptocurrencies Tentative Agenda Decision Response - David Hardidge

Example of accounting for a receivable of prepaid services for 20 years

Example A

Service cost (Year 1) 1000

Inflation rate 2.50%

Discount rate 4%

NPV 20 years 16,811

Useful life 20

Financing component recognised Financing component NOT recognised

Discounted Opening Financing Service Closing Opening Amortisation Closing

Amount Discount Amount Balance Revenue Expense Balance Balance Expense Balance

1 1000 0.9615 961.54 16,811 672 1000 16,484 16,811 841 15,971

2 1025 0.9246 947.67 16,484 659 1025 16,118 15,971 841 15,130

3 1051 0.8890 934.34 16,118 645 1051 15,712 15,130 841 14,290

4 1077 0.8548 920.62 15,712 628 1077 15,263 14,290 841 13,449

5 1104 0.8219 907.41 15,263 611 1104 14,770 13,449 841 12,609

6 1132 0.7903 894.64 14,770 591 1132 14,229 12,609 841 11,768

7 1160 0.7599 881.50 14,229 569 1160 13,638 11,768 841 10,927

8 1189 0.7307 868.79 13,638 546 1189 12,994 10,927 841 10,087

9 1219 0.7026 856.45 12,994 520 1219 12,295 10,087 841 9,246

10 1249 0.6756 843.78 12,295 492 1249 11,538 9,246 841 8,406

11 1280 0.6496 831.46 11,538 462 1280 10,720 8,406 841 7,565

12 1312 0.6246 819.47 10,720 429 1312 9,836 7,565 841 6,725

13 1345 0.6006 807.77 9,836 393 1345 8,885 6,725 841 5,884

14 1379 0.5775 796.34 8,885 355 1379 7,861 5,884 841 5,043

15 1413 0.5553 784.59 7,861 314 1413 6,763 5,043 841 4,203

16 1448 0.5339 773.10 6,763 271 1448 5,585 4,203 841 3,362

17 1484 0.5134 761.85 5,585 223 1484 4,325 3,362 841 2,522

18 1521 0.4936 750.81 4,325 173 1521 2,977 2,522 841 1,681

19 1559 0.4746 739.97 2,977 119 1559 1,537 1,681 841 841

20 1598 0.4564 729.31 1,537 61 1598 0 841 841 0

Total 25545 16811.41 8733.61 25545 16811.4

IFRIC Cryptocurrencies Tentative Agenda Decision Response - David Hardidge

Example of accounting for a receivable of prepaid services for 99 years

Example B

Service cost (Year 1) 1000

Inflation rate 2.50%

Discount rate 4%

NPV 99 years 50,814

Useful life 99

Financing component recognised Financing component NOT recognised

Discounted Opening Financing Service Closing Opening Amortisation Closing

Amount Discount Amount Balance Revenue Expense Balance Balance Expense Balance

1 1000 0.9615 961.54 50,814 2033 1000 51,846 50,814 513 50,300

2 1025 0.9246 947.67 51,846 2074 1025 52,895 50,300 513 49,787

3 1051 0.8890 934.34 52,895 2116 1051 53,960 49,787 513 49,274

4 1077 0.8548 920.62 53,960 2158 1077 55,041 49,274 513 48,760

5 1104 0.8219 907.41 55,041 2202 1104 56,139 48,760 513 48,247

6 1132 0.7903 894.64 56,139 2246 1132 57,252 48,247 513 47,734

7 1160 0.7599 881.50 57,252 2290 1160 58,382 47,734 513 47,221

8 1189 0.7307 868.79 58,382 2335 1189 59,529 47,221 513 46,707

9 1219 0.7026 856.45 59,529 2381 1219 60,691 46,707 513 46,194

10 1249 0.6756 843.78 60,691 2428 1249 61,870 46,194 513 45,681

11 1280 0.6496 831.46 61,870 2475 1280 63,064 45,681 513 45,168

12 1312 0.6246 819.47 63,064 2523 1312 64,275 45,168 513 44,654

13 1345 0.6006 807.77 64,275 2571 1345 65,501 44,654 513 44,141

14 1379 0.5775 796.34 65,501 2620 1379 66,742 44,141 513 43,628

15 1413 0.5553 784.59 66,742 2670 1413 67,999 43,628 513 43,115

16 1448 0.5339 773.10 67,999 2720 1448 69,270 43,115 513 42,601

17 1484 0.5134 761.85 69,270 2771 1484 70,557 42,601 513 42,088

18 1521 0.4936 750.81 70,557 2822 1521 71,859 42,088 513 41,575

19 1559 0.4746 739.97 71,859 2874 1559 73,174 41,575 513 41,061

20 1598 0.4564 729.31 73,174 2927 1598 74,503 41,061 513 40,548

21 1638 0.4388 718.81 74,503 2980 1638 75,845 40,548 513 40,035

22 1679 0.4220 708.46 75,845 3034 1679 77,200 40,035 513 39,522

23 1721 0.4057 698.26 77,200 3088 1721 78,567 39,522 513 39,008

24 1764 0.3901 688.17 78,567 3143 1764 79,945 39,008 513 38,495

25 1808 0.3751 678.21 79,945 3198 1808 81,335 38,495 513 37,982

26 1853 0.3607 668.36 81,335 3253 1853 82,736 37,982 513 37,469

27 1899 0.3468 658.60 82,736 3309 1899 84,146 37,469 513 36,955

28 1946 0.3335 648.95 84,146 3366 1946 85,566 36,955 513 36,442

29 1995 0.3207 639.70 85,566 3423 1995 86,994 36,442 513 35,929

30 2045 0.3083 630.51 86,994 3480 2045 88,428 35,929 513 35,415

31 2096 0.2965 621.38 88,428 3537 2096 89,869 35,415 513 34,902

32 2148 0.2851 612.30 89,869 3595 2148 91,316 34,902 513 34,389

33 2202 0.2741 603.56 91,316 3653 2202 92,767 34,389 513 33,876

34 2257 0.2636 594.84 92,767 3711 2257 94,221 33,876 513 33,362

35 2313 0.2534 586.15 94,221 3769 2313 95,676 33,362 513 32,849

36 2371 0.2437 577.74 95,676 3827 2371 97,132 32,849 513 32,336

37 2430 0.2343 569.34 97,132 3885 2430 98,588 32,336 513 31,823

38 2491 0.2253 561.19 98,588 3944 2491 100,040 31,823 513 31,309

39 2553 0.2166 553.03 100,040 4002 2553 101,489 31,309 513 30,796

40 2617 0.2083 545.09 101,489 4060 2617 102,931 30,796 513 30,283

41 2682 0.2003 537.15 102,931 4117 2682 104,367 30,283 513 29,769

42 2749 0.1926 529.39 104,367 4175 2749 105,792 29,769 513 29,256

43 2818 0.1852 521.80 105,792 4232 2818 107,206 29,256 513 28,743

44 2888 0.1780 514.20 107,206 4288 2888 108,606 28,743 513 28,230

45 2960 0.1712 506.75 108,606 4344 2960 109,991 28,230 513 27,716

46 3034 0.1646 499.44 109,991 4400 3034 111,356 27,716 513 27,203

47 3110 0.1583 492.26 111,356 4454 3110 112,700 27,203 513 26,690

48 3188 0.1522 485.20 112,700 4508 3188 114,020 26,690 513 26,177

49 3268 0.1463 478.24 114,020 4561 3268 115,313 26,177 513 25,663

50 3350 0.1407 471.39 115,313 4613 3350 116,576 25,663 513 25,150

51 3434 0.1353 464.62 116,576 4663 3434 117,805 25,150 513 24,637

52 3520 0.1301 457.94 117,805 4712 3520 118,997 24,637 513 24,124

53 3608 0.1251 451.34 118,997 4760 3608 120,149 24,124 513 23,610

54 3698 0.1203 444.80 120,149 4806 3698 121,257 23,610 513 23,097

55 3790 0.1157 438.33 121,257 4850 3790 122,317 23,097 513 22,584

56 3885 0.1112 432.04 122,317 4893 3885 123,325 22,584 513 22,070

57 3982 0.1069 425.80 123,325 4933 3982 124,276 22,070 513 21,557

58 4082 0.1028 419.70 124,276 4971 4082 125,165 21,557 513 21,044

59 4184 0.0989 413.64 125,165 5007 4184 125,987 21,044 513 20,531

60 4289 0.0951 407.71 125,987 5040 4289 126,738 20,531 513 20,017

61 4396 0.0914 401.81 126,738 5070 4396 127,411 20,017 513 19,504

62 4506 0.0879 396.03 127,411 5096 4506 128,002 19,504 513 18,991

63 4619 0.0845 390.34 128,002 5120 4619 128,503 18,991 513 18,478

64 4734 0.0813 384.68 128,503 5140 4734 128,909 18,478 513 17,964

65 4852 0.0781 379.10 128,909 5156 4852 129,214 17,964 513 17,451

66 4973 0.0751 373.61 129,214 5169 4973 129,409 17,451 513 16,938

67 5097 0.0722 368.20 129,409 5176 5097 129,488 16,938 513 16,424

68 5224 0.0695 362.86 129,488 5180 5224 129,444 16,424 513 15,911

69 5355 0.0668 357.65 129,444 5178 5355 129,267 15,911 513 15,398

70 5489 0.0642 352.50 129,267 5171 5489 128,948 15,398 513 14,885

71 5626 0.0617 347.40 128,948 5158 5626 128,480 14,885 513 14,371

72 5767 0.0594 342.41 128,480 5139 5767 127,853 14,371 513 13,858

73 5911 0.0571 337.46 127,853 5114 5911 127,056 13,858 513 13,345

74 6059 0.0549 332.61 127,056 5082 6059 126,079 13,345 513 12,832

75 6210 0.0528 327.79 126,079 5043 6210 124,912 12,832 513 12,318

76 6365 0.0508 323.05 124,912 4996 6365 123,543 12,318 513 11,805

77 6524 0.0488 318.38 123,543 4942 6524 121,961 11,805 513 11,292

78 6687 0.0469 313.78 121,961 4878 6687 120,153 11,292 513 10,779

79 6854 0.0451 309.25 120,153 4806 6854 118,105 10,779 513 10,265

80 7025 0.0434 304.77 118,105 4724 7025 115,804 10,265 513 9,752

81 7201 0.0417 300.39 115,804 4632 7201 113,235 9,752 513 9,239

82 7381 0.0401 296.06 113,235 4529 7381 110,384 9,239 513 8,725

83 7566 0.0386 291.81 110,384 4415 7566 107,233 8,725 513 8,212

84 7755 0.0371 287.59 107,233 4289 7755 103,767 8,212 513 7,699

85 7949 0.0357 283.45 103,767 4151 7949 99,969 7,699 513 7,186

86 8148 0.0343 279.37 99,969 3999 8148 95,820 7,186 513 6,672

87 8352 0.0330 275.35 95,820 3833 8352 91,300 6,672 513 6,159

88 8561 0.0317 271.39 91,300 3652 8561 86,391 6,159 513 5,646

89 8775 0.0305 267.47 86,391 3456 8775 81,072 5,646 513 5,133

90 8994 0.0293 263.60 81,072 3243 8994 75,321 5,133 513 4,619

91 9219 0.0282 259.81 75,321 3013 9219 69,115 4,619 513 4,106

92 9449 0.0271 256.05 69,115 2765 9449 62,430 4,106 513 3,593

93 9685 0.0261 252.35 62,430 2497 9685 55,243 3,593 513 3,079

94 9927 0.0251 248.70 55,243 2210 9927 47,525 3,079 513 2,566

95 10175 0.0241 245.11 47,525 1901 10175 39,251 2,566 513 2,053

96 10429 0.0232 241.57 39,251 1570 10429 30,392 2,053 513 1,540

97 10690 0.0223 238.09 30,392 1216 10690 20,918 1,540 513 1,026

98 10957 0.0214 234.65 20,918 837 10957 10,798 1,026 513 513

99 11231 0.0206 231.27 10,798 432 11231 -1 513 513 -0

Total 420607 50813.56 369792.25 420607 50813.73

Canadian Accounting Standards Board 277 Wellington Street West, Toronto, ON Canada M5V 3H2 T. 416 977.3222 F. 416 204.3412 www.frascanada.ca

1

May 8, 2019

Submitted electronically via [email protected]

IFRS Interpretations Committee

Columbus Building

7 Westferry Circus

Canary Wharf

London E14 4HD

United Kingdom

Dear Sirs:

Re: Tentative Agenda Decision – Holdings of Cryptocurrencies

This letter is the response of the Canadian Accounting Standards Board (AcSB) to the

IFRS Interpretations Committee’s (Committee) tentative agenda decision on holdings of cryptocurrencies.

This tentative agenda decision was published in the March 2019 IFRIC® Update.

In formulating the views expressed in this letter, we considered input from our IFRS® Discussion Group

(Group) at its January 2018 meeting on the appropriate accounting model to apply to holdings of

cryptocurrencies. The Group consists of members with a range of background and experience, including

preparers, users and auditors of financial statements prepared in accordance with IFRS Standards.

We are concerned with the Committee’s observation that IAS 38 Intangible Assets is applicable to

holdings of cryptocurrencies. IAS 38 was written long before cryptocurrencies were developed. As a

result, we have reservations about the appropriateness of the measurement model in IAS 38 in achieving

fair presentation for holdings of cryptocurrencies, as expressed by various International Accounting

Standards Board (IASB) and Committee members during the deliberations process.

We think a more a proactive way of ensuring the appropriateness of reporting cryptoassets would be to

undertake a project in this area given the concerns expressed with IAS 38’s measurement model. That

said, if the Committee proceeds to finalizing the agenda decision, we suggest including a reference to

paragraph 17(c) of IAS 1 Presentation of Financial Statements to remind entities to provide additional

disclosures when compliance with the specific requirements in IFRS Standards is insufficient to enable


https://www.frascanada.ca/en/acsb/about

https://www.frascanada.ca/en/acsb/committees/ifrsdg

https://www.frascanada.ca/-/media/frascanada/acsb/ifrsdg-past-meetings/2018-01-10-cryptocurrencies-en.pdf

AcSB Response to Holdings of Cryptocurrencies May 8, 2019

2

financial statement users to understand the impact of particular transactions, other events and conditions

on the entity’s financial position and financial performance. In our view, if describing the fair value

performance of a cryptocurrency is important to a user’s understanding of the entity’s financial position

and profit or loss, then this information should be disclosed unless it is already shown in the financial

statements.

We think that including this additional point would be helpful to ensure users are provided with relevant

information until the IASB sees the need to undertake standard-setting action related to cryptoassets. We

would be pleased to elaborate on our comments in more detail if you require. If so, please contact me or,

alternatively, Katharine Christopoulos, Senior Principal, Accounting Standards (+1 416 204‐3270 or email

[email protected]) or Davina Tam, Principal, Accounting Standards (+1 416 204‐3514 or

email [email protected]).

Yours truly,

Linda F. Mezon, FCPA, FCA

CPA (MI), CGMA

Chair, Canadian Accounting Standards Board

[email protected]

+1 416 204‐3490

About the Canadian Accounting Standards Board

We are an independent body with the legal authority to establish accounting standards for use by all Canadian

publicly accountable enterprises, private enterprises, not-for-profit organizations and pension plans in the private

sector. We are comprised of a full-time Chair and volunteer members from a variety of backgrounds, including

financial statement users, preparers, auditors and academics; a full-time staff complement supports our work.

Our standards

We have adopted IFRS® Standards as issued by the IASB for publicly accountable enterprises. Canadian securities

legislation permits the use of U.S. GAAP in place of IFRS Standards in certain circumstances. We support a shared

goal among global standard setters of high-quality accounting standards that result in comparable financial reporting

outcomes regardless of the GAAP framework applied.

We developed separate sets of accounting standards for private enterprises, not-for-profit organizations and pension

plans. Pension plans are required to use the applicable set of standards. Private enterprises and not-for-profit

organizations can elect to apply either the set of standards developed for them, or IFRS Standards as applied by

publicly accountable enterprises.




AcSB Response to Holdings of Cryptocurrencies May 8, 2019

3

Our role vis-à-vis IFRS Standards

Our responsibility to establish Canadian GAAP necessitates an endorsement process for IFRS Standards. We

evaluate and rely on the integrity of the IASB’s due process as a whole, and monitor its application in practice. In

addition, we perform our own due process activities for each new or amended IFRS Standard to ensure that the

standard is appropriate for application in Canada. We reach out to Canadians on the IASB’s proposals to understand

and consider their views before deciding whether to endorse a final IFRS Standard. A final standard is available for

use in Canada only after we have endorsed it as Canadian GAAP.

_____________________________________________________________________________________________

About the IFRS® Discussion Group

The IFRS Discussion Group (the Group) is an advisory committee of the Canadian Accounting Standards Board

(AcSB) that provides a regular public forum to discuss issues arising in Canada from the application of

IFRS Standards. The Group is made aware of such issues through its members, who have an in-depth knowledge of

IFRS Standards, and our stakeholders, who can submit issues for consideration by the Group. Potential agenda

items are assessed against a set of criteria including whether the issue is widespread (either within an industry or

across various industries) in Canada, and whether there is divergent practice or the potential for divergent practice.

The Group’s discussion generally acts to raise awareness in order to help stakeholders understand the principles and

requirements in IFRS Standards. However, at times, the Group may make a recommendation to the AcSB to refer a

particular issue to the IASB or IFRS Interpretations Committee. The AcSB discusses the recommendation and

decides on next steps.

1

IFRS Interpretations Committee

IFRS Foundation

Columbus Building

7 Westferry Circus

London

E14 4HD

Date 10/05/2019

Subject: Tentative Agenda Decision — Holdings of Cryptocurrencies

Dear IFRS Interpretations Committee:

On behalf of the International Air Transport Association’s (“IATA”) Industry Accounting Working

Group (“IAWG”), we are writing to comment on the Tentative Agenda Decision - Holdings of

Cryptocurrencies on April 17, 2019. IAWG is made up of senior finance professionals of major

airlines and represents over 290 IATA member airlines.

IAWG does not support the issuance of the agenda decision as drafted for the following

reasons:

it applies existing accounting standards to an asset that is unique and this asset would

not have been contemplated when these standards were established;

the information that would be created under this agenda decision may not be the most

useful in many cases; and

the analysis, while sound in relation to analyzing the asset in relation to the existing

standards, does not appear to align well to the economic substance of cryptocurrencies.

IAWG would prefer that the IASB or IFRIC issue a standard or interpretation that aligns the

accounting treatment with the underlying economics of the asset and results in the most useful

information for users of the financial statements. We do not believe this agenda decision will

serve that purpose. Furthermore, while the issue raised to IFRIC was limited to the holding of a

cryptocurrency asset, the accounting treatment for this item needs to be more broadly

considered. For example, how would a cryptocurrency receivable or payable be treated under

IFRS? A cryptocurrency held by a reporting entity would be treated under this agenda decision

as inventory or an intangible asset, but what if the entity were to deposit the cryptocurrency

with an intermediary (such as an exchange)? It appears that they would no longer be subject to

the agenda decision, despite essentially holding the same rights under both scenarios.

IAWG also has the following specific concerns in relation to this agenda decision if it was to be

issued:

1. The scope of the agenda decision is not clear

The agenda decision states the following:

2

The Committee noted that a range of cryptoassets exist. For the purposes of its discussion,

the Committee considered a subset of cryptoassets—cryptocurrencies—with the following

characteristics:

a. A cryptocurrency is a digital or virtual currency that is recorded on a distributed

ledger and uses cryptography for security.

b. A cryptocurrency is not issued by a jurisdictional authority or other party.

c. A holding of a cryptocurrency does not give rise to a contract between the holder

and another party.

The structure of this section appears to indicate that all cryptocurrencies share these three

characteristics. This need not be true. A cryptocurrency could be issued by a sovereign body,

although that is not the case at this time. Also, a cryptocurrency could be linked to a sovereign

currency and used as a means of payment clearing, thereby creating a contract between the

holder and the clearing party. Rather than define a cryptocurrency, we recommend that IFRIC

limits the scope of this agenda decision to the holding of cryptocurrencies that meet all of these

characteristics.

The language that has been bolded and underlined is another concern. A jurisdictional authority

is generally understood to be a court, but it is unlikely that was the intention of this wording. It

was likely meant to convey “sovereign authority”. The term “other party” is also unclear as all

cryptocurrencies will be issued by some party. Perhaps the intention was “other similar party”.

We recommend rewording this sentence as follows:

“b. A cryptocurrency is issued to the public by other than a sovereign authority authorized to issue currency or similar organization.”

This language would effectively scope out private cryptocurrencies used by closed groups for

purposes, such as the clearing of payments, and those issued by central banks or international

and regional organizations to member states.

2. Could a cryptocurrency be treated as cash?

While we agree that an essential element of an asset acting as cash is that it acts as a medium

of exchange, we question if it must be the monetary unit in pricing goods or services and that it

act as a functional currency. Many sovereign currencies are not convertible and therefore are

not widely used as a medium of exchange in commercial transactions. This does not disqualify

them as cash. Likewise, an entity has but one functional currency, yet holdings of foreign notes

and coins are reported as cash.

IAWG believes that cryptocurrencies should be treated as cash if they function as cash (widely

used as a medium of exchange by the entity). This definition would exclude the vast majority of

cryptocurrencies, if not all, but would provide a basis for treating the asset based upon its

function, rather than a definition that seemingly if applied in the same manner would disqualify

many sovereign currencies.

3

If you would like to discuss our comments further, please do not hesitate to contact Thomas

Egan, IAWG Accounting Technical Expert at [email protected]. The IAWG would be interested in

engaging in a dialogue with the IFRIC staff to clarify any issues related to our submission or the

broader issues related to aircraft financing, valuation and transactions related to aircraft.

Yours sincerely,

Oran Har Nevo

Chairman

IATA IAWG

Donal Cahalan

Vice-Chairman

IATA IAWG


Comments from ARDF Taiwan on Tentative Agenda Decision—Holdings of Cryptocurrencies

Page 1

103台北市大同區承德路一段 17號 20樓

20th Fl., No.17, Sec.1, Chengde Rd., Taipei 103, Taiwan

TEL:886 2 2549-0549 FAX:886 2 2549-0634

http://www.ardf.org.tw

May 13, 2019

Ms. Sue Lloyd, Chair

International Financial Reporting Standards Interpretations Committee

Columbus Building

7 Westferry Circus

Canary Wharf

London E14 4HD

United Kingdom

Dear Ms. Lloyd,

Tentative Agenda Decision—Holdings of Cryptocurrencies

The Financial Accounting Issues Task Force of the Taiwan Financial Reporting Standards

Committee (TFRSC) of Accounting Research and Development Foundation in Taiwan

appreciates the opportunity to respond to the above tentative agenda decision.

The attachments (Attachment 1) are our comments to this tentative agenda decision. The

comments are those of the Financial Accounting Issues Task Force and do not necessarily

represent official opinions of the TFRSC.

If you have any question about our comments, please contact me (via my email:

[email protected]) or Ms. Margaret Tsui (via her email:[email protected]).

Sincerely Yours,

Chi-Chun Liu, Ph.D.

Chairman,

Taiwan Financial Reporting Standards Committee,

Accounting Research and Development Foundation, Taiwan

Attachment 1 Comments from ARDF Taiwan on Tentative Agenda Decision—Holdings of Cryptocurrencies


Page 2



TEL:886 2 2549-0549 FAX:886 2 2549-0634


Tentative Agenda Decision—Holdings of Cryptocurrencies

Tentative Agenda Decision

The Committee discussed how IFRS Standards apply to holdings of cryptocurrencies.

The Committee noted that a range of cryptoassets exist. For the purposes of its discussion,

the Committee considered a subset of cryptoassets—cryptocurrencies—with the following

characteristics:

a. A cryptocurrency is a digital or virtual currency that is recorded on a distributed ledger

and uses cryptography for security.

b. A cryptocurrency is not issued by a jurisdictional authority or other party.

c. A holding of a cryptocurrency does not give rise to a contract between the holder and

another party.

Nature of a cryptocurrency

Paragraph 8 of IAS 38 Intangible Assets defines an intangible asset as ‘an identifiable

non-monetary asset without physical substance’.

Paragraph 12 of IAS 38 states that an asset is identifiable if it is separable or arises from

contractual or other legal rights. An asset is separable if it ‘is capable of being separated or

divided from the entity and sold, transferred, licensed, rented or exchanged, either

individually or together with a related contract, identifiable asset or liability’.

Paragraph 16 of IAS 21 The Effects of Changes in Foreign Exchange Rates states that ‘the

essential feature of a non-monetary item is the absence of a right to receive (or an

obligation to deliver) a fixed or determinable number of units of currency’.

The Committee observed that a holding of cryptocurrency meets the definition of an

intangible asset in IAS 38 on the grounds that (a) it is capable of being separated from the

holder and sold or transferred individually; and (b) it does not give the holder a right to

receive a fixed or determinable number of units of currency.

Which IFRS Standard applies to holdings of cryptocurrencies?

The Committee concluded that IAS 2 Inventories applies to cryptocurrencies when they are



Page 3



TEL:886 2 2549-0549 FAX:886 2 2549-0634


held for sale in the ordinary course of business. If IAS 2 is not applicable, an entity applies

IAS 38 to holdings of cryptocurrencies. The Committee considered the following in

reaching its conclusion.

Intangible Asset

IAS 38 applies in accounting for all intangible assets except:

a. those that are within the scope of another Standard;

b. financial assets, as defined in IAS 32 Financial Instruments: Presentation;

c. the recognition and measurement of exploration and evaluation assets; and

d. expenditure on the development and extraction of minerals, oil, natural gas and similar

non-regenerative resources.

Accordingly, the Committee considered whether a holding of cryptocurrency meets the

definition of a financial asset in IAS 32 or is within the scope of another Standard.

Financial asset

Paragraph 11 of IAS 32 defines a financial asset. In summary, a financial asset is any asset

that is: (a) cash; (b) an equity instrument of another entity; (c) a contractual right to receive

cash or another financial asset from another entity; (d) a contractual right to exchange

financial assets or financial liabilities with another entity under particular conditions; or (e)

a particular contract that will or may be settled in the entity’s own equity instruments.

The Committee concluded that a holding of cryptocurrency is not a financial asset. This is

because a cryptocurrency is not cash (see below). Nor is it an equity instrument of another

entity. It does not give rise to a contractual right for the holder and it is not a contract that

will or may be settled in the holder’s own equity instruments.

Cash

Paragraph AG3 of IAS 32 states that ‘currency (cash) is a financial asset because it

represents the medium of exchange and is therefore the basis on which all transactions are

measured and recognised in financial statements. A deposit of cash with a bank or similar

financial institution is a financial asset because it represents the contractual right of the

depositor to obtain cash from the institution or to draw a cheque or similar instrument



Page 4



TEL:886 2 2549-0549 FAX:886 2 2549-0634


against the balance in favour of a creditor in payment of a financial liability.’

The Committee observed that the description of cash in paragraph AG3 of IAS 32 implies

that cash is expected to be used as a medium of exchange (ie used in exchange for goods or

services) and as the monetary unit in pricing goods or services to such an extent that it

would be the basis on which all transactions are measured and recognised in financial

statements.

Some cryptocurrencies can be used in exchange for particular good or services. However,

the Committee noted that it is not aware of any cryptocurrency that is used as a medium of

exchange and as the monetary unit in pricing goods or services to such an extent that it

would be the basis on which all transactions are measured and recognised in financial

statements. Consequently, the Committee concluded that a holding of cryptocurrency is not

cash because cryptocurrencies do not currently have the characteristics of cash.

Inventory

IAS 2 applies to inventories of intangible assets. Paragraph 6 of that Standard defines

inventories as assets:

a. held for sale in the ordinary course of business;

b. in the process of production for such sale; or

c. in the form of materials or supplies to be consumed in the production process or in the

rendering of services.

The Committee observed that an entity may hold cryptocurrencies for sale in the ordinary

course of business. In that circumstance, a holding of cryptocurrency is inventory for the

entity and, accordingly, IAS 2 applies to that holding.

The Committee also observed that an entity may act as a broker-trader of cryptocurrencies.

In that circumstance, the entity considers the requirements in paragraph 3(b) of IAS 2 for

commodity broker-traders who measure their inventories at fair value less costs to sell.

Paragraph 5 of IAS 2 states that broker-traders are those who buy or sell commodities for

others or on their own account. The inventories referred to in paragraph 3(b) are principally

acquired with the purpose of selling in the near future and generating a profit from

fluctuations in price or broker-traders’ margin.

Disclosure



Page 5



TEL:886 2 2549-0549 FAX:886 2 2549-0634


An entity applies the disclosure requirements in the IFRS Standard applicable to its

holdings of cryptocurrencies. Accordingly, an entity applies the disclosure requirements in

(a) paragraphs 36–39 of IAS 2 to cryptocurrencies held for sale in the ordinary course of

business, and (b) paragraphs 118–128 of IAS 38 to holdings of cryptocurrencies to which it

applies IAS 38. If an entity measures holdings of cryptocurrencies at fair value, paragraphs

91–99 of IFRS 13 Fair Value Measurement specify applicable disclosure requirements.

The Committee noted that, applying paragraph 122 of IAS 1 Presentation of Financial

Statements, an entity would disclose judgements that its management has made regarding

its accounting for holdings of cryptocurrencies if those are part of the judgements that had

the most significant effect on the amounts recognised in the financial statements.

The Committee also noted that paragraph 21 of IAS 10 Events after the Reporting Period

requires an entity to disclose any material non-adjusting events, including information

about the nature of the event and an estimate of its financial effect (or a statement that such

an estimate cannot be made). For example, an entity holding cryptocurrencies would

consider whether changes in the fair value of those holdings after the reporting period are

of such significance that non-disclosure could influence the economic decisions that users

of financial statements make on the basis of the financial statements.

Response to the above Tentative Agenda Decision:

We agree with IFRS Interpretations Committee’s intention to clarify how entities apply

existing IFRS standards to holdings of cryptocurrencies. However, we think the

characteristics and nature of cryptocurrencies are not exactly the same as either intangible

assets (as defined in IAS38) or inventories (as defined in IAS2). Besides, the ways

cryptocurrencies produce economic benefits differ from either intangible assets or inventories.

Cryptocurrencies fundamentally act more as a medium of exchange. Entities hold

cryptocurrencies to exchange goods, services or flat currencies. The economic benefits of

cryptocurrencies arise from subsequent exchange or sale in the market, while intangible

assets or inventories themselves embody economic benefits that flow to entities through use

or sale. Therefore, we believe applying IAS38 or IAS2 to holdings of cryptocurrencies may

not provide the relevant information to the users. As of today, the purposes for which

cryptocurrencies are held and the kinds of cryptocurrencies entities hold vary. In our view, the

Interpretations Committee could provide some guidance according to Conceptual Framework



Page 6



TEL:886 2 2549-0549 FAX:886 2 2549-0634


for Financial Reporting, for example, how entities apply paragraphs 5.12-5.14 and 5.19-5.23

to evaluate the existence uncertainty and measurement uncertainty of the holdings of

cryptocurrencies, and how entities apply paragraphs 6.43-6.76 to select measurement basis.

We suggest the IASB develop a new IFRS standard or amend existing IFRS standards to

address the accounting for holdings of cryptocurrencies and transactions involving

cryptocurrencies, when holdings of cryptocurrencies become more prevalent and the position

of cryptocurrencies become more clear.

10th

May, 2019

Ms Sue Lloyd,

Chair, IFRS Interpretations committee,

IFRS Foundation,

London, UK

Dear Ms Sue,

Subject: Tentative Agenda Decision (TAD) March, 2019 – Public Comments by May

15th

, 2019

The Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India

(the ICAI) welcomes the following four tentative agenda decisions of IFRS Interpretations

Committee published in March 2019:

1. Costs to Fulfil a Contract (IFRS 15)

2. Holdings of Cryptocurrencies

3. Effect of a Potential Discount on Plan Classification (IAS 19)

4. Subsurface Rights (IFRS 16)

We agree with the above mentioned clarifications.

With kind regards

CA. M.P Vijay Kumar

Chairman

Accounting Standards Board

Institute of Chartered Accountants of India

14 May 2019

Chair of the IFRS Interpretations Committee Columbus Building, 7 Westferry Circus Canary Wharf, London, E14 4HD United Kingdom

Dear Ms. Sue Lloyd:

The Korea Accounting Standards Board (KASB) greatly appreciate the efforts of the IFRS

Interpretations Committee to reach out to diverse constituents around the globe and reflect their

opinions in IFRSs.

KASB sends its comments on the tentative agenda decision on Holdings of Cryptocurrencies.

The enclosed comments represent official positions of the KASB after extensive due process and

deliberation.

Please do not hesitate to contact us if you have any questions regarding our comments. You may

direct your inquiries either to me ([email protected]) or to Min Joo Kim

([email protected]), Senior Technical Manager of the KASB.

Best regards,

Eui-Hyung Kim

Chair, Korea Accounting Standards Board

Cc: Se-hwan Park, Vice-Chair, Korea Accounting Standards Board

Hyun-duck Choi, Director, Korea Accounting Standards Board


2 / 4

Comments on the Tentative Agenda Decision Relating to Holdings of Cryptocurrencies

1. The Korea Accounting Standards Board (hereinafter referred to as the ‘KASB’ or ‘we’)

does not agree with the tentative agenda decision that a cryptocurrency should be accounted

for as an intangible asset regardless of its purpose of holding it.

2. Although a cryptocurrency meets the definition of an intangible asset in paragraph 8 of IAS

38 which states that an intangible asset is ‘an identifiable non-monetary asset without

physical substance’ in a literal sense, applying IAS 38 may not be relevant because a

cryptocurrency is mostly held for investment-purposes.

3. Relevant financial information is capable of making a difference in decisions by users,

assisting them to confirm their predictions of the entity. However, the financial information

in accordance with IAS 38 is not relevant because both cryptocurrency holders and external

users recognise cryptocurrencies as one of their investments (similar to financial

instruments).

Suggestions

4. The issue of consistency with current accounting in practice should be thoroughly

considered before announcing the agenda decision. In some jurisdictions, the related

accounting practice has already been established through the establishment of relevant

standards. In addition, the past analysis by the IASB staff* (paragraph 37, Agenda 4B, Sept

2018) also stated that the majority of entities applying IFRS accounted for cryptocurrencies

as having a similar nature to financial instruments.

5. We believe that the accounting for cryptocurrencies as intangible assets differs from how

the market recognizes cryptocurrencies, and that the agenda decision is not sufficient to

resolve the current confusion in practice.

3 / 4

*(Paragraph 37, Agenda 4B, Sept 2018)

Short-term suggestions

6. The KASB recommends holding off the announcement of the Agenda Decision and we

suggest a narrow scope amendment to IAS 38 to remove investment-purpose

cryptocurrencies from its scope.

7. As stated in paragraph 7 of IAS 38, exclusions from the scope of a standard may occur if

activities or transactions are so specialised that they give rise to accounting issues that may

need to be dealt with in a different way. Such issues arise in the accounting for expenditure

on the exploration for, or development and extraction of, oil, gas and mineral deposits in

extractive industries. Likewise, we suggest that cryptocurrencies be excluded from the

scope of IAS 38 to provide relevant information in the short term.

8. If this is the case, however, there would be no specific standard to be applied for an

investment-purpose cryptocurrency; so an accounting policy may be developed and applied

at the discretion of management in accordance with paragraphs 10-11 of IAS 8.

Long-term suggestions

9. The KASB suggests carrying out an accounting standard-setting project for investment-

purpose intangible assets such as cryptocurrencies.

10. Where there is an active market for cryptocurrencies, subsequent measurement should be

at fair value and changes in fair value should be reflected in profit or loss. If an active

market does not exist, subsequent measurement should be at acquisition cost and the

37 Of the 26 entities identified as reporting holdings of cryptocurrencies at the balance sheet date above:

(a) 18 (69%) account for those holdings at FVTPL. In some cases, the entities say they are

applying IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9

Financial Instruments. Other entities say they apply paragraph 11 of IAS 8 Accounting

Policies, Changes in Accounting Estimates and Errors, and consider IAS 39 or IFRS 9 to

address similar and related issues.

4 / 4

difference should be recognised as an impairment loss if the recoverable amount is lower

than the acquisition cost.

11. We are pleased to comment on the tentative agenda decision on Holdings of

Cryptocurrencies, and we hope our comments are useful for the IFRS Interpretations

Committee and the IASB.

Deloitte Touche Tohmatsu Limited

Hill House

1 Little New Street

London

EC4A 3TR

Phone: +44 (0)20 7936 3000

Fax: +44 (0)20 7583 0112

www.deloitte.com/about

Direct phone: +44 20 7007 0884

[email protected]

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services

to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

Deloitte Touche Tohmatsu Limited is a private company limited by guarantee incorporated in England & Wales under company number 07271800, and its registered office is Hill House, 1 Little New Street, London, EC4a, 3TR, United Kingdom.

© 2019 . For information, contact Deloitte Touche Tohmatsu Limited.

Dear Ms Lloyd

Tentative agenda decision – Holdings of cryptocurrencies

Deloitte Touche Tohmatsu Limited is pleased to respond to the IFRS Interpretations Committee’s publication

in the March 2019 IFRIC Update of the tentative decision not to take onto the Committee’s agenda the

request for clarification on how IFRS Standards apply to holdings of cryptocurrencies.

We agree with the IFRS Interpretations Committee’s decision not to add this item onto its agenda for the

reasons set out in the tentative agenda decision. However, we believe that the usefulness of the agenda

decision could be enhanced by addressing two recurring issues related to cryptocurrencies that are

accounted for under IAS 38: can cryptocurrencies meet the definition to be presented as held for sale under

IFRS 5 and how does a holder of cryptocurrencies determine whether the asset should be presented as

current or non-current under IAS 1. Addressing these issues appears relevant in the context of a request to

clarify how IFRS Standards apply to holding of cryptocurrencies.

In addition, we note that the tentative agenda decision highlights the poor definition of cash provided in IFRS

Standards. In particular, what are the factors that should be considered when assessing whether the use of

an asset as a “medium of exchange and as the monetary unit in pricing goods or services” is sufficiently

widespread to support the conclusion that this asset constitutes cash. We agree with the conclusion that

cryptocurrencies do not currently constitute cash. However, this conclusion may need to be reassessed in the

future and hence it may be useful for the Board to consider whether a more robust definition of cash should

be developed.

If you have any questions concerning our comments, please contact Veronica Poole in London at +44 (0) 20

7007 0884.

14 May 2019

Sue Lloyd Chair IFRS Interpretations Committee Columbus Building 7 Westferry Circus Canary Wharf London

United Kingdom E14 4HD

2

Yours sincerely

Veronica Poole

Global IFRS Leader

14 May 2019 Tentative agenda decisión – Holdings of Cryptocurrencies Ms Sue Lloyd, Chair, IFRS Interpretations Committee, IFRS Foundation, London, UK. Dear Ms Sue: The IFRS Technical Committee of the Universidad de Chile is pleased to respond to the IFRS Interpretations Committee’s march 2019 publication of the tentative decision not to take onto the Committee’s agenda the holdings of Cryptocurrencies. We think that this issue must be added to the IFRIC’s agenda because even though the cryptocurrencies are in the scope of IAS 38, Intangible Assets, this is an implicit assumption. We consider there must be an explicit and clear requirement, and this could require an amendment to the IAS 38 Standard. We recommend to undertake a new project which could include specific requirements like disclosures, measurement and other significant issues connected with cryptocurrencies. Yours sincerely, Leonardo Torres IFRS Technical Committee President Universidad de Chile

Contact: Bank Details: Register of Associations: Zimmerstr. 30 .D-10969 Berlin . Deutsche Bank Berlin District Court Berlin-Charlottenburg, VR 18526 Nz (via Markgrafenstr.19a) IBAN-Nr. President: Phone: +49 (0)30 206412-0 DE26 1007 0000 0070 0781 00 Prof. Dr. Andreas Barckow Fax: +49 (0)30 206412-15 BIC (Swift-Code) Executive Director: E-Mail: [email protected] DEUTDEBBXXX Prof. Dr. Sven Morich

Deutsches Rechnungslegungs Standards Committee e.V.

Accounting Standards Committee of Germany

DRSCASCG Zimmerstr. 30 10969 Berlin Sue Lloyd Chair of the IFRS Interpretations Committee 7 Westferry Circus, Canary Wharf London E14 4HD United Kingdom Dear Sue,

RE: The IFRS IC’s tentative agenda decisions in its March 2019 meeting

On behalf of the Accounting Standards Committee of Germany (ASCG), I am writing to com-ment on the tentative agenda decisions taken by the IFRS Interpretations Committee (IFRS IC) and published in the March 2019 IFRIC Update.

Generally speaking, we do not have significant reservations regarding the tentative agenda decisions, absent overarching concerns – in particular as regards the applicability of an agenda decision to slightly different fact patterns, the possible need to change one’s accounting policy, and the potentially limited understandability of an agenda decision and its reasoning without concurrently taking note of the more substantial analysis in the background agenda papers.

Notwithstanding our general content with the decisions taken, we would like to share additional thoughts on the tentative agenda decisions on IAS 19 as well as on cryptocurrencies.

Please find our detailed comments in the appendix to this letter. If you would like to discuss our views further, please do not hesitate to contact Jan-Velten Große ([email protected]) or me.

Yours sincerely,

Andreas Barckow

President

IFRS Technical Committee

Phone: +49 (0)30 206412-12

E-Mail: [email protected]

Berlin, 15 May 2019

- 3 -

Deutsches Rechnungslegungs Standards Committee e.V.

Accounting Standards Committee of Germany

DRSCHoldings of cryptocurrencies

Whilst we can understand where the IFRS IC landed and why and how it landed there, we feel uncomfortable with the robustness and the relevance of that agenda decision.

Firstly, we note that there is not simply one type of cryptocurrency – even though many might think all cryptos are the same and are, in fact, like Bitcoin. Some cryptos may be liquid and accepted as a means of payment – which seems to hint at these being more like cash or currencies, others have a restricted use targeted at only some very specific service that can be rendered (e.g. a token), and again others may not come with any currency acknowledge-ment at all. This seems to suggest that the nature of the crypto needs to be considered more deeply than just walking down the classic literature line of IAS 2/16 IAS 32/IFRS 9 IAS 38, as the outcome of that assessment might not be appropriate under all facts and circumstances, nor might it make particular sense. Further, the liquidity aspect is directly linked to potential measurement attributes to be used, which, again, may make more sense in some scenarios than in others. E.g., a general fair value requirement might not be the most appropriate answer given many level 3 uncertainties coming to the fore, but an opposite requirement of a cost notion might be equally irrelevant if cost is, or starts out at, close to zero.

Secondly, we are aware that talks have started amongst central banks and fiscal authorities as to what these cryptos are from a fiscal or monetary point of view (a currency, a [quasi] financial instrument, etc.). It would be unfortunate if those discussions led to a completely dif-ferent result than what is being reasoned by accountants under the IFRS literature. We com-pletely understand the limited mandate of the IFRS IC in this regard, but we believe that starting and ending a debate on something that is just evolving in different shape and form does unduly narrow the discussion. This all seems to suggest that the subject is sitting better with the Board who can apply a fresh look into this.

1

Grant Thornton International Ltd

20 Fenchurch Street, Level 25

London EC3M 3BY

Sue Lloyd

Chair, IFRS Interpretations Committee

Columbus Building

7 Westferry Circus

Canary Wharf

London E14 4HD

15 May 2019

Submitted electronically through the IFRS Foundation website (www.ifrs.org)

Dear Ms Lloyd,

Tentative agenda decision – Holdings of Cryptocurrencies

Grant Thornton International Ltd is pleased to respond to the IFRS Interpretations Committee’s

tentative agenda decision ‘Holdings of Cryptocurrencies’ which was published in the March 2019 IFRIC

Update.

We agree with the tentative agenda decision which we see as being the correct technical interpretation

of IFRS, and which is consistent with guidance that we ourselves have previously issued in this area.

We note however, that some entities that hold cryptocurrencies and do not act as broker-traders,

consider that the accounting outcome produced by the tentative agenda decision does not adequately

reflect the performance of their businesses. In Canada for instance, 76% of issuers according to research

conducted by the Canadian Securities Administrators accounted for holdings of cryptocurrencies at fair

value though profit or loss (FVTP&L) indicating that they believe FVTP&L accounting provides the most

relevant information for their users.

While we agree with the tentative agenda decision, we have some sympathy with the viewpoint of these

entities and suggest that it may be worth undertaking a review of IAS 38 ‘Intangible Assets’ in the future

to take account of developments in the digital world since that Standard was issued. As you know both

http://www.ifrs.org/

2

EFRAG and the UK’s Financial Reporting Council are undertaking research projects which have the

objective of improving the reporting of intangible assets, and the findings from these projects may

provide useful information to such a review of IAS 38.

If you have any questions on our response, or wish us to amplify our comments, please contact me at

[email protected] or by telephone on + 44 207 391 9556.

Yours sincerely,

Edward Haygarth

Director – Global IFRS Team

Grant Thornton International Ltd

(NBAA)

TANZANIA

THE NATIONAL BOARD OF ACCOUNTANTS AND AUDITORS

Date: 15th May, 2019

Chief Executive Officer,

IFRS Foundation

Columbus Building

7 West ferry Circus

Canary Wharf

London E14 4HD

Dear Sir/Madam

RE: COMMENTS ON THE TENTATIVE AGENDA – HOLDING OF

CRYPTOCURRENCIES

Refer to the heading above.

NBAA as the PAO responsible for the professional training, development and regulation of the

accountancy profession in Tanzania and as the member board of the International Federation

of Accountants welcomes the opportunity to provide you with our comments on the Exposure

Draft for onerous contract – cost of fulfilling a contract.

In principle, we are supportive of the decision that has been made by the IFRS Interpretation

Committee as follows:

Nature of cryptocurrencies

Cryptocurrency is an identifiable non-monetary asset without physical substance and meets the

definition of an intangible asset in IAS 38 on the grounds that it:

(a) is capable of being separated from the holder and sold or transferred individually; and

(b) does not give the holder a right to receive a fixed or determinable number of units of

currency.

IFRS Standard for holdings of cryptocurrencies:

1: Financial Asset

The holding of cryptocurrency is not a financial asset. This is because a cryptocurrency

is not cash. Nor is it an equity instrument of another entity. It does not give rise to a

contractual right for the holder and it is not a contract that will or may be settled in the

holder’s own equity instruments.

2: Cash

holding of cryptocurrency is not cash because cryptocurrencies do not currently have

the characteristics of cash because it cannot be used as a medium of exchange and as

the monetary unit in pricing goods or services to such an extent that it would be the

basis on which all transactions are measured and recognized in financial statements as

per paragraph AG3 of IAS 32.

TEL NOS: +255 26 2963318-9

E-MAIL: [email protected]

WEBSITE: www.nbaa.go.tz

NATIONAL AUDIT OFFICE “AUDIT HOUSE”,

8TH FLOOR, 4 UKAGUZI ROAD,

P. O. BOX 1271,

41104 TAMBUKARELI,

DODOMA, TANZANIA

3: Inventories

As per the definition of inventories an entity may hold cryptocurrencies for sale in the

ordinary course of business. In that circumstance, a holding of cryptocurrency is

inventory for the entity and, accordingly, IAS 2 applies to that holding.

4: Disclosures

Entities holding cryptocurrencies shall apply disclosure requirements as per the

applicable standard.

If you require any clarification on our comments, please contact the undersigned.

Thank you in advance for your cooperation.

Yours sincerely,

CPA Angyelile V. Tende

For: EXECUTIVE DIRECTOR

NBAA Dar es Salaam Branch: Mhasibu House, Bibi Titi Mohamed Street,

P. O. Box 5128, Dar Es Salaam, Tanzania Tel: +255 22 2211890-9

COMISSÃO DE VALORES MOBILIÁRIOS Rua Sete de Setembro, 111/2-5º e 23-34º Andares – Centro – Rio de Janeiro - RJ – CEP: 20050-901 – Brasil

Tel.: (21) 3554-8686 - www.cvm.gov.br

The Chairman of the IFRS IC Ms. Sue Lloyd 7 Westferry Circus Canary Wharf London E14 4HD United Kingdom 15 May 2019

REF: Committee´s Tentative Agenda Decision – Holdings of Cryptocurrencies - Agenda Paper 4, March 2019. Dear Ms. Lloyd,

The Office of the Chief Accountant of the Securities and Exchange Commission of Brazil

(CVM) welcomes the opportunity to comment on the TAD – Holdings of

Cryptocurrencies. Considering the importance that the topic cryptocurrencies has

achieved worldwide, we have concerns both in terms of process and content of the

technical analysis.

In relation to process, we do not agree that a topic such as cryptocurrencies should be

addressed by the Interpretation Committee and, specially, through an Agenda Decision.

In our opinion, this topic deserves its own research project which could result in a new

IFRS standard or, at least, minor scope amendments to current IFRS standards.

Cryptocurrencies are a new category of assets which did not exist when the majority of

IFRS standards were developed. Trying to include such assets in the current standards,

through an Agenda Decision, and without a IFRS standard revision, may have unintended

consequences and result in accounting not correctly reflecting the economic essence of

such assets. Moreover, considering the vast number of IFRS Standards involved, the

various uses of cryptocurrencies and the IFRS IC mandate1, we understand that the topic

is too broad for an IFRS IC consideration.

In relation to content, we understand that the TAD portraits a narrow and ultra-positivistic

interpretation of IAS 38 by focusing only on the definitional elements of IAS 38

(identifiable, non-monetary, and without physical substance) and disregarding its initial

purpose when determining its applicability to cryptocurrencies (teleological approach).

The IAS 38 paragraph 9 provides context for the types of assets that we believe IAS 38

was designed for; assets such as those that arise from expending resources on scientific

or technical knowledge, new process and systems, licenses, trademarks and brand names.

Therefore, if cryptocurrencies are acquired for investment purposes, for use as a medium

of exchange, or held for trading, they should clearly be considered outside the scope of

IAS 38, which has its nature tied to the maintenance of operational activities (similarly to

PPE).

Moreover, in relation to measurement, considering such assets as intangibles, according

to IAS 38, would result in accounting for them at cost, or, at least, at fair value through

OCI, not affecting Profit and Loss even if the sole purpose of holding the asset is

speculative; beyond not reflecting the economic essence of the transaction, this would

undermine the usefulness of the Statement of Profit and Loss.

We understand the ED's proposal to frame the recognition and measurement of

cryptocurrencies to the criteria set forth in IAS 2 and 38 is not appropriate because it

would limit the accounting representation of these assets in the financial statements and

would not faithfully represent all the possible uses for this new type of asset

(cryptocurrency).

Finally, despite the conclusion of the TAD that cryptocurrencies are not currency because

they not entirely attend the definition prescribed at the AG3 of IAS 32, it must be taken

into consideration that, in some transactions, cryptocurrencies are in fact a medium of

1 IFRS Foundation Due Process Handbook: “5.17 The issue should be sufficiently narrow in scope that

it can be addressed in an efficient manner by the Interpretations Committee, but not so narrow that it is not cost-effective for the Interpretations Committee and interested parties to undertake the due process that would be required when making changes to IFRSs”.

exchange (e.g. used in exchange for goods or services) and may be used as the monetary

unit when pricing goods or services.

We consider that the AG3 of IAS 32 relates to the concept of functional currency because

it focuses on the use of currency for pricing goods and measuring transactions for the

objective of recognition in the financial statements. This understanding is corroborated

by the paragraph 8 of IAS 21: “Functional currency is the currency of the primary

economic environment in which the entity operates”. In this case, while a broad research

project is not conducted, an interesting analogy which would prevent from limiting the

possibilities of accounting presentation for cryptocurrencies (IAS 2 and IAS 38), would

be through the definition of foreign currency, also set forth in paragraph 8 of IAS 21:

“Foreign currency is a currency other than the functional currency of the entity”.

In conclusion, the tentative of using the current Standards for framing a new type of assets

they were not designed for creates technical inconsistencies only resolvable through a

comprehensive standard-setting process conducted by the IASB Board. Therefore, we

urge the IASB not to issue this TAD and to add the topic cryptocurrencies to the IASB

work plan.

Respectfully yours,

Paulo Roberto Gonçalves Ferreira

Deputy Chief Accountant

José Carlos Bezerra da Silva

Chief Accountant

of 4

Brane Inc. [email protected] (416) 500-2477 Ottawa / Toronto

Submitted electronically via [email protected] IFRS Interpretations Committee Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD United Kingdom May 15, 2019 Dear Committee Members: Re: Tentative Agenda Decision – Holdings of Cryptocurrencies We would like to thank the IFRS Interpretations Committee (‘Committee’) for inviting affected stakeholders to respond to the Committee’s tentative agenda decision on holdings of cryptocurrencies, published in the March 2019 IFRIC® Update.

Brane Inc. is a Canadian-based fintech company focused on blockchain technology and digital asset custody. We are developing products and solutions that will make this technology accessible, secure and useful for the global investment community.

We are concerned and deeply disappointed with the Committee’s decision to not add this topic to its work plan, but rather only provide the observation that IAS 38 Intangible Assets is applicable to holdings of cryptocurrencies. The development of cryptocurrencies is a new phenomenon that significantly post-dates IAS 38. As a result, IAS 38 can be considered at best a very limited solution to achieving fair presentation for these types of assets. The fields of distributed ledger technology and cryptoassets are rapidly evolving. Accordingly, it is critical that the IASB undertake standard-setting action related to cryptoassets sooner rather than later, so that appropriate guidance can be confidently applied by industry participants.

We certainly understand the process by which the Committee has concluded that IAS 38 applies to holdings of crypto assets. We internally reached the same decision in 2017, in a similar manner, regarding our own holdings of digital currency assets (cryptocurrencies). We,

of 4

however, recognized at the time that this was an imperfect solution that did not adequately capture the nature of the assets for which for which we were attempting to account. Absent any meaningful guidance under IFRS, IAS 38 was viewed as the “least objectionable choice” of alternative applications of IFRS with respect to fair presentation of cryptocurrencies. We continue to believe that this is the case.

We recommend that the Committee prioritize a project to ensure that reporting of crypto assets is appropriate, fair and capable of being applied consistently. In that respect we ask the Committee to consider the following points:

a) The definition of a financial asset in paragraph 11 of IAS 32 considers five possibilities, one of which is cash. Paragraph AG3 of IAS 32 references a “medium of exchange” in its definition of cash. We point out that the creation of Bitcoin, the most popular cryptocurrency to date, was created precisely as a peer-to-peer version of electronic cash to permit direct payments from one party to another1; that is, it was purposefully intended to act as a medium of exchange. We suggest that the present IFRS Standards provide an incomplete definition of cash in that they do not define how sufficiently widespread the “medium of exchange” must be to support the conclusion that a given asset constitutes “cash”. Bitcoin, Ethereum and other cryptocurrencies, regardless of whether they or not they are specifically intended for use as electronic cash, are now being accepted by a number of commercial entities as payment for goods and services 2 and the Japan recognizes Bitcoin as legal tender. This trend will continue, and most likely accelerate, in the near future.

We suggest that the Committee review and update the definition of cash in the IFRS Standards.

b) IAS 32 (paragraph 11) also references a contractual right. The Committee has observed that holding cryptocurrency does not give rise to a contractual right for the holder. Strictly speaking, this is incorrect. The most widely known crypto asset is Bitcoin, however it is by far not the only cryptocurrency – there are more than 2,100 different cryptocurrencies 3 based on a number of different blockchain technologies. The second most popular cryptocurrency – Ether – underpins the blockchain network that processes the largest number of transactions and has attracted the greatest amount of developer

1 In fact, the title of the original whitepaper outlining the creation of a cryptocurrency is “Bitcoin:

A Peer-to-Peer Electronic Cash System”. 2 Whole Foods, Nordstrom, Lowe’s, Crate & Barrel, Petco, Barnes & Noble, Office Depot,

Overstock.com and others all accept Bitcoin and/or Ether at their retail stores. 3 The website coinmarketcap.com provides data on 2,177 cryptocurrencies as of the date of this

submission.

of 4

attention: Ethereum. This network is transitioning from a proof-of-work consensus protocol (similar to Bitcoin and others) to a proof-of-stake consensus protocol (‘PoS’). Under PoS, participants in the Ethereum blockchain network will be required to hold Ether cryptocurrency in order to participate in the network through staking and transaction validation. Entities (individuals and others) will choose to participate as they will receive financial reward for appropriate participation but, to receive the right to participate they will be obligated to hold the cryptocurrency Ether. Furthermore, this participation will occur via a smart contract that governs the rights and obligations of participants. Since the Ethereum mainnet is used for more than 80% of all cryptocurrencies, the transition to PoS will have a significant impact on the blockchain ecosystem. It is therefore very important that the contractual rights and obligations conferred to holder of a cryptocurrency that utilizes PoS consensus protocol be considered when determining if a cryptocurrency is a financial asset.

We request that the Committee consider the technical attributes of PoS when determining whether or not cryptocurrency can be considered a financial asset.

c) Cryptocurrencies made headlines in late 2017 and early 2018 when the values attached to them skyrocketed, and then fell just as abruptly. Unfortunately, these trading actions distracted many from understanding the underlying blockchain technology. It is important that accountants not be fooled by the attention that cryptocurrency speculation has garnered. The primary uses of cryptocurrency tokens are as a medium of exchange and for their utility, with utility becoming more important in a PoS environment. The fair presentation of any cryptocurrency should consider the intent of the reporting entity. This could result in differing treatment, but that is because the intents are different. For example, an active trader might consider their cryptocurrency holdings to be inventory (commodity) whereas a participant in a PoS mainnet would appropriately and fairly disclose them as a financial asset. Each would account for their holdings in accordance with the applicable and appropriate IFRS Standard.

We recommend that the Committee include the intent of the reporting entity when considering what constitutes fair presentation of holdings of cryptocurrencies.

d) It is critical to note that the field of blockchain technology is rapidly growing and cryptocurrency represents only one facet of this sector. A number of regulatory bodies are recognizing this fact and have commenced efforts to provide guidance in the space. Two examples of this include recent work on the part of the SEC to review initial coin offerings and the Canadian joint

of 4

CSA/IIROC consultation paper regarding a possible framework for crypto asset trading platforms. It would irresponsible for the accounting profession now to choose to not get involved in providing detailed guidance around accounting for cryptocurrency and other blockchain-related tokens. The “wait and see” approach implied by the Committee’s tentative agenda decision is not, in our opinion, an effective or appropriate solution for accounting for holdings of cryptocurrencies. Our own decision to apply IAS 38 was intended as a temporary measure until IFRS Standards caught up with the application of today’s technologies. As we have noted, the application of IAS 38 is already behind the application of blockchain technology. By failing to provide more appropriate guidance now, the profession risks not only falling further behind but, even worse, condoning financial statement presentation of cryptocurrencies and other crypto assets that will, in all likelihood, not be considered ‘fair’.

We ask that the Committee add to its work plan a project to develop definitive and useful guidance with respect to the holdings of cryptocurrency and other crypto assets.

We encourage the Committee to continue to engage with members of the industry as it develops accounting guidance in the areas of blockchain technology and cryptocurrencies.

We would be happy to provide additional information or answer any questions that you might have in relation to our submission. Yours truly,

T. Paul Rowland, CPA, CA, CPA (Illinois), CGMA

Chief Financial Officer & Corporate Secretary

May 15, 2019 By Electronic Submission at IFRS.org Ms. Sue Lloyd Chair of the IFRS Interpretations Committee Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD United Kingdom RE: Tentative Agenda Decision – Holdings of Cryptocurrencies Dear IFRS Interpretations Committee Members: The Chamber of Digital Commerce (the “Chamber”) welcomes the opportunity to submit these comments for consideration related to the IFRS Interpretations Committee (the “Committee”) tentative agenda decision on Holdings of Cryptocurrencies (the “Consultation”) published in the March 2019 IFRIC Update.1 The Chamber is the world’s largest blockchain trade association. Our mission is to promote the acceptance and use of digital assets and blockchain technology, and we are supported by a diverse membership that represents the blockchain industry globally. Through education, advocacy, and close coordination with policymakers, regulatory agencies, and industry across various jurisdictions, our goal is to develop a pro-growth legal environment that fosters innovation, job creation, and investment. We represent the world’s leading innovators, operators, and investors in the blockchain ecosystem, including leading edge start-ups, software companies, global IT consultancies, financial institutions, insurance companies, law firms, and investment firms.

1 IFRIC Update (March 2019), https://www.ifrs.org/news-and-events/updates/ifric-updates/march-2019/.

https://www.ifrs.org/projects/work-plan/holdings-of-cryptocurrencies/comment-letters-projects/tad-holdings-of-cryptocurrencies/#consultation

https://www.ifrs.org/news-and-events/updates/ifric-updates/march-2019/

2

I. The Digital Asset Accounting Consortium The Chamber and its members work closely together through a few key working groups and initiatives, one of which is the Digital Assets Accounting Consortium (“DAAC”). The DAAC is comprised of accounting and technology professionals in the blockchain ecosystem that are interested in the development of accounting and reporting standards for digital assets, advocating for appropriate generally accepted accounting principles (“GAAP”) standards in the United States as well as International Accounting Standards (“IAS”) for its members, and engaging with relevant standard-setting bodies. The DAAC also provides input to government and industry on the impact blockchain-based technologies may have on the future of accounting and auditing methods. Members of the DAAC have observed the IFRS’ and International Accounting Standards Board’s activities related to cryptocurrencies and appreciate your diligent attention to this new category of asset that is increasingly widespread throughout the global economy. Your tentative agenda decision will be of paramount importance for the blockchain industry and an indispensable resource for accounting professionals who are lacking guidance on how to properly account for holdings of cryptocurrencies.

II. Accounting Treatment for Digital Assets

We believe blockchain technology and its ability to digitize assets are one of the most important technical advancements in modern finance and will have impacts as big as transportation, telephony, and the Internet. New products and services derived from blockchain technology have the potential to revolutionize entire categories of industry – including banking; government records; title and asset ownership; medical records and health care; digital identity; trading, clearing, and settlement; secure voting systems; and many others. Blockchain technology is a newly-created medium of and operating system for anything of value.2

It is within this context that it is important to understand that digital assets may not fit neatly into simply one characterization. As a result, we do not believe that universally applying intangible asset accounting under IAS 38 to virtually all cryptocurrency holdings is appropriate. For example, in some circumstances it may be more appropriate to apply inventory accounting under IAS 2. For other use cases, IAS 32 and IAS 39 applicable to financial instruments may be more appropriate for the holding of cryptocurrency. In this way, those such as investors reviewing the financial statements of companies holding crypto assets will better understand the true nature of that asset and make better decisions as a result.

2 Because of this vast potential, we suggest that the Committee consider calling these assets crypto assets rather than cryptocurrencies because they may serve another purpose other than as a currency. For purposes of this letter and for consistency, we will use the term referenced by the Consultation.

https://digitalchamber.org/initiatives/

https://digitalchamber.org/initiatives/

3

III. Recommendations for Accounting Treatment of Cryptocurrencies In order to provide meaningful feedback for this Consultation, the DAAC conducted an industry survey (which included its members as well as others) that asked detailed questions about how companies are currently accounting for holdings of cryptocurrencies – whether as assets, liabilities, revenues earned, and/or expenses paid. The survey also asked how companies account for offsets due to fluctuations in value for balance sheet items, liabilities, revenues, and operating expenses. Finally, the survey asked if respondents agreed with the Committee’s tentative decision to apply IAS 38, Intangible Assets, to holdings of cryptocurrencies if they are not held for sale in the ordinary course of business. The DAAC also formed a small task force to develop a set of use cases that demonstrate how cryptocurrencies should be accounted for in different situations.3 Based on an analysis of our survey results and use cases, we believe universally applying intangible asset accounting under IAS 38 to virtually all cryptocurrency holdings (those not meeting IAS 2) is inappropriate. Intangible assets are commonly known to comprise goodwill and other non-liquid assets. By universally treating cryptocurrency as intangible assets, investors may not be alerted to the true nature of the asset when examining financial statements. Use cases identified by our members indicate that the holding of cryptocurrency is deliberate, not accidental. For example, a cryptocurrency exchange may hold excess cryptocurrency in hardware wallets (also known as “cold wallets”) with the intent of holding for speculative purposes. This intent to hold for a longer term, but with the availability to liquidate at some point if needed, reflects attributes of an investment but with no intent to immediately liquidate.4 In another example, a cryptocurrency miner may enter into loan and service arrangements where the repayment of loan and services are denominated in cryptocurrency. The company’s treasury department determines an investment policy to hold cryptocurrency as a part of its long-term investment objective and sells the remaining cryptocurrency to be held in cash and other marketable securities.5 In both examples, the use and intent for holding cryptocurrencies should be the primary basis for determining the accounting method applied. Finance executives consider where to invest cash among cash, equity/debt marketable securities, and cryptocurrency to address shareholder value and risks. Unlike under IAS 39 Financial Instruments: Recognition and Measurement, under IAS 38, revaluation of intangible assets or cumulative gain or loss from financial instruments are recognized as equity except to the extent that they reverse a revaluation decrease or are financial assets derecognized to profit and loss. Further, even though cryptocurrency does not meet the definition of financial asset in IAS 32, Financial Instruments: Presentation, it also is vastly different from the illustrations of intangible assets provided in IAS 38. By definition, it appears the primary difference between a cryptocurrency asset and an investment under IAS 39 is the fact that

3 A summary of the survey and the text of the use cases are provided in the Appendix to this Letter. 4 See Use Case 1 in the Appendix. 5 See Use Case 3 in the Appendix.

4

cryptocurrency may not be an equity or debt interest. All other attributes of cryptocurrencies with speculative or investment intent appear to correlate to the characteristics of an investment under IAS 32 and IAS 39. Furthermore, some entities hold cryptocurrency with short-term intent and motivation to sell in the near future, contrasted with entities that hold cryptocurrencies with an intent to hold for a longer term. IAS 39 provides for different accounting options for investments that have varied intentions on duration. We believe that the Committee should consider the length of intent to hold when considering the various accounting treatments. Just as it would be inappropriate to account for an investment with immediate intent to liquidate the same as an investment to hold for a long or indefinite period of time, it similarly would be inappropriate to apply IAS 38 accounting equally to all crypto assets with immediate intent to dispose as well as with long term intentions to hold. The current variation illustrated in use cases and in the survey results in the Appendix provide a clear demonstration of the need to consider various forms of accounting treatment. For these reasons, we believe that it is more appropriate to allow for different methods of accounting depending on the intent and use of the crypto asset. We suggest applying inventory accounting under IAS 2 (that the Committee’s agenda decision prescribes when the intent is to resell cryptocurrency) and IAS 32 and IAS 39 for the holding of cryptocurrency (with the understanding that the scope for both IAS may need to be expanded to address cryptocurrency). In addition to the use cases on holding of cryptocurrencies, our members also incur expenses and therefore liabilities in cryptocurrencies. An entity with both cryptocurrency assets and liabilities should also consider the revaluation of the cryptocurrencies subsequent to the initial recognition. As such, the guidance under IAS 39 should apply to such revaluations and the net effect of both assets and liabilities should be recorded under equity until it is derecognized.

* * *

We appreciate this opportunity to share our analysis and feedback on the Consultation and reiterate that we appreciate your work on this topic. Speaking for nearly 200 members working in the blockchain industry along with input from other companies in the industry, we are able to provide unique insights into the challenges of firms who are accounting for holdings of cryptocurrencies and can provide further assistance to the Committee as you continue this important work. Please do not hesitate to contact us. Respectfully Submitted, Perianne Boring Founder and President Chamber of Digital Commerce

5

Appendix

Survey Results The key findings of our survey are as follows:

● Of the respondents that had crypto assets, 50% carry them as investments and 39% as inventory, whereas only 19% carry them as intangible assets.

● 75% of respondents treat change in fair value of crypto as either gain/loss to earnings or equity.

● Of the respondents commenting on the IFRS position, 64% disagreed with accounting for crypto assets as intangible assets.

The survey was conducted from February to April 2019. Use Cases Case 1 Cryptocurrency exchange holds cryptocurrency in online software (also known as “hot wallets”) for liquidity to meet immediate cash flow needs. They account for this as a “trading investment” at fair value because of the need to liquidate at any time. Because of the immediate need to liquidate, the change in fair value of this asset is recorded against earnings. In contrast, excess cryptocurrency is held in cold wallets with the intent of holding for somewhat more speculative purposes. This intent to hold for a longer term, but with the availability to liquidate at some point if needed, reflects attributes of an investment but with no intent to immediately liquidate. Hence, the changes in fair value are reflected as part of other comprehensive income (“OCI”). Case 2 A cryptocurrency dealer acquires cryptocurrency in the normal course of business with the intent to sell to customers. In some cases, these balances are acquired from customers to accommodate their sell orders. In other cases, these balances are acquired from miners and exchanges with the intent to meet customer buy orders. In each case, the cryptocurrency exists on its balance sheet solely for the purpose of reselling back to customers at a profit margin. The intent and manner of holding this cryptocurrency is indicative of inventory and, accordingly, the organization accounts for these digital assets held as inventory, not investments, and adjusts to the lower of cost or fair value consistent with inventory asset accounting.

6

Case 3 A cryptocurrency miner receives cryptocurrency in the normal course of business. The cryptocurrency received is liquidated in an orderly and systematic manner, within a short period of time from recording the revenue received. The revenue is recorded at the fair value when received. When sold to the exchange, the gain or loss is recorded to earnings. Any impairment on cryptocurrency held at the balance sheet date is also recorded to earnings and in another case to OCI. The miner also enters into loan and service arrangements where the repayment of loan and services are denominated in cryptocurrency. The company’s treasury department determines an investment policy to hold cryptocurrency as a part of its long-term investment objective and sells the remaining cryptocurrency to be held in cash and other marketable securities. Case 4 A digital ledger technology company operates as a services company and utilizes a utility token to provide services to customers. In the course of serving its customers, the company generates revenues while expensing the utility tokens consumed by it to deliver utility. Likewise, the company may also: a) buy utility tokens, b) earn utility tokens by performing services on said protocol, or c) by making technical or other contributions to the protocol utility. The revenue in all cases is recorded at the fair value when received and recorded at zero cost-basis on the balance sheet and offset by revenues earned. Any gains or losses measured against the fair value price, other than being consumed by the protocol (which is not an exchange event), are recorded as other income or loss to operations. All utility tokens or digital assets used in the course of earning income for services operations would not be marked to market but kept at FIFO prices on the balance sheet in the inventory account and reported as expenses when consumed in relation to the decline of inventory of the utility token. The company also recognizes gains and losses for market conditions it if sells any oversupply to other utility buyers. The utility tokens are not traded as securities or invested for periods other than as are speculated to be consumed in a year. The company’s treasury department determines a treasury management policy to manage tokens as a part of its operations and only sells or buys tokens for utility purposes of which the proceeds are unrestricted given the utility nature of any transactions.

-1-

May 15, 2019 Ms. Sue Lloyd Chair IFRS Interpretations Committee International Accounting Standards Board Columbus Building, 7 Westferry Circus Canary Wharf London E14 4HD United Kingdom Dear Ms. Lloyd: Consejo Mexicano de Normas de Información Financiera (CINIF), the accounting standard setting body in Mexico, welcomes the opportunity to submit its comments on the Tentative Agenda Decision – Holdings of Cryptocurrencies (the TAD) issued on March 8, 2019,

comments to be received by May 15, 2019. Set forth below you will find our comments on the topics included in the TAD.

Overall comments

In general terms, we do not agree with the TAD, which recommends that the accounting recognition of cryptocurrencies be made pursuant to IAS 2, Inventories, or IAS 38, Intangible Assets, as an entity deems appropriate. Our conclusions in this regard are

presented below. Nature of cryptocurrencies A cryptocurrency is a digital record based on encrypted codes that are used as a form of payment and whose transfer can only be carried out via electronic means. By their nature, a cryptocurrency is recovered when it is used as a form of payment or is sold. Consequently, we believe that measurement of cryptocurrencies at fair value best reflects the economic substance of these assets. Use of IAS 2, Inventories The recommendation of the IASB to use IAS 2 is for entities that hold cryptocurrencies for sale in the ordinary course of business; however, CINIF believes that this is inappropriate given that in accordance with IAS 2, cryptocurrencies would be measured at the lower of their acquisition cost and their net realizable value. Net realizable value is a value determined by the entity fundamentally based on internal factors. CINIF believes that acquisition cost and net realizable value do not represent the recoverable value of a cryptocurrency, since a cryptocurrency is negotiated and recovered based on its fair value.

-2-

Use of IAS 38, Intangible Assets

For entities that hold investments in cryptocurrencies, the recommendation of the IASB is to apply IAS 38, which is focused on establishing the accounting treatment of intangible assets that essentially are recovered through their use or occasionally through their sale. Based on IAS 38, a cryptocurrency could be measured at its acquisition cost or at its fair value.

We emphasize that acquisition cost does not represent the economic substance of cryptocurrencies. If the revaluation model is elected, cryptocurrencies would be measured at fair value and the result of revaluation would be recognized in other comprehensive income. CINIF does not agree with such recognition, since the assets in question are speculative in nature, to be recovered in the short term, consequently, it would be inappropriate to recognize the result of revaluation in other comprehensive income rather than in profit or loss. Conclusions of CINIF CINIF believes that cryptocurrencies are assets distinct from those addressed in existing standards. IAS 2 and IAS 38 were issued a long time before cryptocurrencies arose; consequently, the application of those standards to the accounting recognition of cryptocurrencies could affect the fair presentation of the financial statements. Accordingly, we recommend the development and issuance of a specific standard for cryptocurrencies. ------------------------- Should you require additional information on our comments listed above, please contact Elsa B. García at (52) 55 5596 5633 ext. 108 or me at (52) 55 5596 5633 ext. 115 or by e-mail at [email protected] or [email protected], respectively. Kind regards, C.P.C. Felipe Perez Cervantes President of the Mexican Financial Reporting Standards Board Consejo Mexicano de Normas de Información Financiera (CINIF) cc. Amaro Gomes



IKATAN AKUNTAN INDONESIA

(INSTITUTE OF INDONESIA CHARTERED ACCOUNTANTS)

APPENDIX – Comment Letter of Holding A Cryptocurrency

IFRIC Tentative Agenda Decision

DSAK IAI Respond

We agree with the IFRIC conclusion as to which the existing IFRS standards, including the

related disclosures requirements, are applicable to account for holding a cryptocurrency.

As highlighted in the research of IFRIC staff1, majority of companies (69%) around the world

holding cryptocurrency recognise it as financial instruments measured at fair value through profit

and loss. While the IFRIC conclusion would help to reduce diversity in the reporting methods

applied and support consistent application of the IFRS standards to such holdings, the IFRIC

conclusion may not meet the market expecation so the Board may need to consider its decision not

to add a project on cryptocurrencies to its work plan.

In Indonesia, we do not have sufficient information to report how many companies hold

cyrptocurrency in their balance sheet. But our sense, most likely it will be very few. Indonesian

Financial Services Authority and Central Bank’s regulation prohibits cryptocurrency to be used as

medium of transaction. However digital platform offering marketplace for sellers and buyers of

cryptocurrency is gaining popularities in Indonesia (e.g Indodax.com with 1.65 millions members),

and we believe cryptocurrency transactions are increasing among individuals (daily transaction of

Bitcoin in Indodax.com is 34.1 billion rupiah).

--- END OF DOCUMENT ---

1 IFRIC meeting in September 2018, Staff Paper Agenda Ref 4B

The Committee concluded that IAS 2 Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business. If IAS 2 is not applicable, an entity applies IAS 38 to holdings of cryptocurrencies. The Committee considered the following in reaching its conclusion.

staff paper june 2019 ifrs interpretations committee ... · 2 for the purposes of generating future...

Documents